[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

                       INSPECTOR GENERAL AUDITS, 



                               BEFORE THE


                                 OF THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION


                            DECEMBER 1, 2011


                           Serial No. 112-27

          Printed for the use of the Committee on Agriculture

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                        COMMITTEE ON AGRICULTURE

                   FRANK D. LUCAS, Oklahoma, Chairman

BOB GOODLATTE, Virginia,             COLLIN C. PETERSON, Minnesota, 
    Vice Chairman                    Ranking Minority Member
TIMOTHY V. JOHNSON, Illinois         TIM HOLDEN, Pennsylvania
STEVE KING, Iowa                     MIKE McINTYRE, North Carolina
K. MICHAEL CONAWAY, Texas            JOE BACA, California
JEFF FORTENBERRY, Nebraska           DENNIS A. CARDOZA, California
JEAN SCHMIDT, Ohio                   DAVID SCOTT, Georgia
GLENN THOMPSON, Pennsylvania         HENRY CUELLAR, Texas
THOMAS J. ROONEY, Florida            JIM COSTA, California
MARLIN A. STUTZMAN, Indiana          TIMOTHY J. WALZ, Minnesota
BOB GIBBS, Ohio                      KURT SCHRADER, Oregon
AUSTIN SCOTT, Georgia                LARRY KISSELL, North Carolina
SCOTT R. TIPTON, Colorado            WILLIAM L. OWENS, New York
ERIC A. ``RICK'' CRAWFORD, Arkansas  JOE COURTNEY, Connecticut
MARTHA ROBY, Alabama                 PETER WELCH, Vermont
TIM HUELSKAMP, Kansas                MARCIA L. FUDGE, Ohio
RENEE L. ELLMERS, North Carolina     Northern Mariana Islands
RANDY HULTGREN, Illinois             JAMES P. McGOVERN, Massachusetts
REID J. RIBBLE, Wisconsin
KRISTI L. NOEM, South Dakota


                           Professional Staff

                      Nicole Scott, Staff Director

                     Kevin J. Kramp, Chief Counsel

                 Tamara Hinton, Communications Director

                Robert L. Larew, Minority Staff Director


      Subcommittee on Department Operations, Oversight, and Credit

                  JEFF FORTENBERRY, Nebraska, Chairman

TIMOTHY V. JOHNSON, Illinois         MARCIA L. FUDGE, Ohio, Ranking 
STEVE KING, Iowa                     Minority Member
ERIC A. ``RICK'' CRAWFORD, Arkansas  JAMES P. McGOVERN, Massachusetts
KRISTI L. NOEM, South Dakota         JOE BACA, California

               Brandon Lipps, Subcommittee Staff Director


                             C O N T E N T S

Fortenberry, Hon. Jeff, a Representative in Congress from 
  Nebraska, opening statement....................................     1
    Prepared statement...........................................     2
Fudge, Hon. Marcia L., a Representative in Congress from Ohio, 
  opening statement..............................................     3
    Prepared statement...........................................     4


Fong, Hon. Phyllis K., Inspector General, U.S. Department of 
  Agriculture, Washington, D.C.; accompanied by Karen Ellis, 
  Assistant Inspector General for Investigations, OIG, USDA; Gil 
  Harden, Assistant Inspector General for Audit, OIG, USDA.......     4
    Prepared statement...........................................     5

                       INSPECTOR GENERAL AUDITS,


                       THURSDAY, DECEMBER 1, 2011

                  House of Representatives,
 Subcommittee on Department Operations, Oversight, 
                                        and Credit,
                                  Committee on Agriculture,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 10:00 a.m., in 
Room 1300 of the Longworth House Office Building, Hon. Jeff 
Fortenberry [Chairman of the Subcommittee] presiding.
    Members present: Representatives Fortenberry, Johnson, 
Crawford, Fudge, McGovern, and Baca.
    Staff present: Tamara Hinton, Brandon Lipps, Pam Miller, 
John Porter, Debbie Smith, Heather Vaughan, Suzanne Watson, 
Craig Jagger, Lisa Shelton, John Konya, and Caleb Crosswhite.

                     CONGRESS FROM NEBRASKA

    The Chairman. Good morning. This hearing of the 
Subcommittee on Department Operations, Oversight, and Credit to 
review updates on USDA Inspector General audits, including SNAP 
fraud detection and IT compliance will come to order.
    Thank you all for coming this morning. After my opening 
statement, I will turn to the Ranking Member for hers and then 
we will move quickly into the testimony.
    I thank you all for joining us today for this oversight 
hearing. I would like to especially thank Ms. Fong for 
returning to the Subcommittee. Last time you were here, we 
discussed a number of Inspector General investigations and 
together we identified two issues that warranted follow-up. So 
we appreciate your willingness to come today.
    The first issue we will address is fraud and abuse in the 
Supplemental Nutrition Assistance Program, or SNAP as it is 
called. As I said at our last oversight hearing, the rate of 
improper payments has fallen significantly, so we are moving in 
the right direction. But nutrition assistance is by far the 
largest percentage of expenditures by the Department of 
Agriculture. With more than $70 billion in annual spending, 
even low rates of improper payments quickly add up to 
significant waste. In this economy when many people have a real 
need for nutrition assistance to feed and nourish their 
families, we cannot afford to waste any taxpayer dollars.
    When you were last here, Ms. Fong, you mentioned that the 
Food and Nutrition Service could do a better job of using state 
fraud data to detect improper SNAP payments. A number of 
Committee Members, including myself, emphasized how important 
it is to ensure we have the best possible mechanisms in place 
to detect waste and fraud, as well as abuse. I look forward to 
learning more about your conclusions in this regard.
    The second topic I wish to discuss today is the 
Department's efforts to update its information technology. 
Constituents across the country rely on the Department to help 
them access critical programs and services, and the Department 
requires functioning computer networks to provide that service. 
The Department has been given funds to update its IT services, 
and the last time you were here, we discussed a report being 
conducted by your office on whether those funds are being used 
    We would like to discuss your findings in this area to 
ensure that our investment is benefitting our constituents as 
it should. We all are very much aware of the tight budget 
constraints these days.
    As the Subcommittee charged with overseeing the 
Department's operations, we rely on timely and thorough 
investigations from your office in order to ensure good 
government practices. This information not only helps us 
evaluate how the Department is using taxpayer dollars, but it 
also helps us make better policy decisions, going forward. So 
that is why it is critical for your office to supply us with 
timely and accurate data.
    I look forward to learning more about your audit work on 
the SNAP program and the Department's use of information 
technology, but I also would like to learn more about how your 
own office prioritizes resources to complete these audits and 
investigations in a timely manner.
    [The prepared statement of Mr. Fortenberry follows:]

   Prepared Statement of Hon. Jeff Fortenberry, a Representative in 
                         Congress from Nebraska
    Good morning. Thank you for joining us today for this oversight 
hearing. I'd especially like to thank Ms. Fong for returning to our 
Subcommittee. The last time you were here, we discussed a number of 
Inspector General investigations and--together--we identified two 
issues that warranted follow-up.
    The first issue we'll address is fraud and abuse in the 
Supplemental Nutrition Assistance Program, or SNAP as it is commonly 
called. As I said at our last oversight hearing, the rate of improper 
payments has fallen significantly. So we're moving in the right 
    But nutrition assistance is by far the largest percentage of 
expenditures by the Department of Agriculture. With more than $70 
billion in annual spending, even low rates of improper payments quickly 
add up to significant waste.
    In this economy, many people have a real need for nutrition 
assistance to feed and nourish their families. We cannot afford to 
waste taxpayer dollars intended for struggling families.
    When you were last here, Ms. Fong, you mentioned that the Food and 
Nutrition Service could do a better job of using state fraud data to 
detect improper SNAP payments. A number of Committee Members, myself 
included, emphasized how important it is to ensure we have the best 
possible mechanisms in place to detect waste, fraud, and abuse. I look 
forward to learning more about your conclusions on this issue.
    The second topic I want to address is the Department's efforts to 
update its Information Technology. Constituents across the country rely 
on the Department to help them access critical programs and services. 
And the Department requires functioning computer networks to provide 
that service.
    The Department has been given funds to update its Information 
Technology services, and the last time you were here we discussed a 
report being conducted by your office on whether those funds had been 
used effectively. We'd like to discuss your findings in this area to 
ensure that our investment is benefitting our constituents as it 
should. We are facing tighter budget constraints these days, and it's 
more important than ever that we get the maximum benefits from every 
taxpayer dollar.
    As the Subcommittee charged with overseeing the Department's 
operations, we rely on timely and thorough investigations from your 
office in order to ensure good government practices.
    This information not only helps us evaluate how the Department is 
using taxpayer dollars, but it also helps us make better policy 
decisions, going forward.
    That's why it is critical for you to supply us with accurate 
reports in a timely fashion.
    So during this hearing I'm not only looking forward to learning 
more about your audit work on SNAP and the Department's use of 
Information Technology, but also more about how your office prioritizes 
resources to complete these audits and investigations in an efficient 
    With that, I turn to our ranking member for her opening statement.

    The Chairman. With that, I will turn to our Ranking Member, 
Ms. Fudge, for her opening statement.

                       CONGRESS FROM OHIO

    Ms. Fudge. Thank you so much, Mr. Chairman. And thank you, 
Inspector General Fong. Thank you for being here today. And I 
thank you for your follow-up with my office on issues that were 
raised during our June hearing. In particular, I appreciate the 
data you provided on the $256 million saved by USDA through 
waste and fraud investigations.
    Any improper payments made with USDA funds are a concern 
for this Subcommittee. The data provided by the Office of the 
Inspector General reflects ongoing challenges across all USDA 
departments. I raise this point to emphasize the unfairness of 
solely criticizing the Supplemental Nutrition Assistance 
Program. While I acknowledge the program has challenges with 
fraud, those challenges must be rooted out so that the program 
can continue to serve a great national need.
    SNAP is the safety net that helps tens of millions of 
American families during this tough economic time. In my 
district, more than 44,000 households depend on SNAP. More than 
\1/2\ of these households include children. Suburban 
communities are dependent more on SNAP than ever before. 
Between July 2007 and July 2010, suburban communities added 3.2 
million SNAP recipients, an increase of 73 percent. Americans 
in all communities across the nation are in need, and SNAP 
plays a critical role in meeting this great need.
    During my 5 minutes of questioning, I look forward to 
hearing from you about your work to reduce SNAP fraud. I 
support your efforts to ensure that people who need SNAP 
receive the benefits as opposed to those who defraud the 
system. I also look forward to hearing more about your office's 
work on improving USDA's response to civil rights complaints 
and USDA's IT system.
    Thank you again for being here today. Mr. Chairman, I yield 
    [The prepared statement of Ms. Fudge follows:]

    Prepared Statement of Hon. Marcia L. Fudge, a Representative in 
                           Congress from Ohio
    Thank you, Mr. Chairman.
    Inspector General Fong, thank you for being here today. Thank you 
for your follow-up with my office on issues that were raised during the 
June hearing. In particular, I appreciate the data you provided on the 
$256 million saved by USDA through waste and fraud investigations.
    The data provided by the Office of the Inspector General reflects 
ongoing challenges across all USDA departments. The data isn't exactly 
good news. Any improper payments made by USDA are a concern to me and 
to this Subcommittee. However, I raise this point to emphasize the 
unfairness of solely criticizing the Supplemental Nutrition Assistance 
Program. While I acknowledge the program does have challenges with 
fraud, it is effectively serving a great national need.
    SNAP is the safety net that helps to feed tens of millions of 
American families during this tough economic time. In my District, more 
than 44,000 households depend on SNAP. More than \1/2\ of these 
households include children.
    Suburban communities are depending more on SNAP than ever before. 
Between July 2007 and July 2010, suburban communities added 3.2 million 
SNAP recipients-an increase of 73 percent. Americans in all communities 
across the nation are in need and SNAP plays a critical role in meeting 
this great need.
    During my 5 minutes of questioning, I look forward to hearing from 
you about your work to reduce SNAP fraud. I support your efforts to 
ensure the people who need SNAP receive the benefit as opposed to those 
who defraud the system. I also look forward to hearing more about your 
office's work on improving USDA's response to civil rights complaints 
and USDA's IT system. Thank you again for being here today.

    The Chairman. I thank the Ranking Member. And the chair 
would request that the other Members submit their opening 
statements for the record so the witness may begin her 
testimony and ensure there is ample time for questions.
    With that said, I would like to welcome our panel, the 
Honorable Phyllis Fong, Inspector General of the Office of 
Inspector General, U.S. Department of Agriculture here in 
Washington. She is accompanied by Karen Ellis, who is the 
Assistant Inspector General for Investigations; Mr. Gil Harden, 
the Assistant Inspector General for Audit, Office of the 
Inspector General.
    Ms. Fong, please begin.


    Ms. Fong. Well, thank you, Mr. Chairman, Ranking Member 
Fudge, and Members of the Subcommittee. It is a pleasure to be 
here today with you to discuss these issues of great concern. 
And we appreciate the opportunity to talk to you about our 
current work in the SNAP program and with respect to the 
Department's IT programs.
    Since you have a copy of my full statement for the record, 
let me just highlight some of the key points that our testimony 
    In the SNAP program, as you mentioned, we are performing a 
series of audits analyzing the databases of ten states to 
identify participants who may not be eligible to receive 
benefits. And as you know, we recently issued two reports 
concerning our work in Kansas and Florida where we identified 
more than 3,500 recipients who were receiving potential 
improper payments of over $490,000 a month. As our reports 
detailed, these payments went to recipients who were on the 
deceased list, who were disqualified from receiving SNAP 
benefits, who may have had invalid Social Security Numbers, who 
were receiving dual benefits under two separate accounts in one 
state, or who may have been receiving dual benefits 
simultaneously from two different states.
    While our findings to date do not represent large monetary 
sums when you think about it in the context of the SNAP program 
as a whole, they do indicate areas where FNS and the states 
could make progress in reducing potential improper payments. We 
have made several recommendations to FNS to address these 
issues that we found, and FNS has generally agreed to take 
corrective action and has actually implemented some corrective 
action to date.
    As you noted, we also conduct criminal investigations to 
address allegations of fraud and abuse in USDA programs across 
the board. With respect to the SNAP program, in recent years we 
have devoted about \1/2\ of our investigative resources to 
cases that involve the illegal exchange of SNAP benefits for 
cash or other commodities, which is known as trafficking. Over 
the last 2 years, these investigations have resulted in over 
600 convictions and over $98 million in monetary results. My 
written statement provides several examples of these kinds of 
cases and the significant sentences that courts impose in these 
    Finally, I would like to address your interest in USDA's IT 
programs. As you mentioned in your opening statements, USDA 
depends on IT systems to deliver benefits to program recipients 
across its many agencies and responsible areas. And this has 
been a challenge for USDA in terms of bringing its IT 
infrastructure into full compliance with Federal security 
requirements. We, in the OIG, continue to provide audit 
oversight of these activities. As you note, we are currently 
reviewing the use of $40 million that was appropriated last 
year to address and assess whether there have been any 
improvements in the Department's IT infrastructure.
    In a closely related audit, we have recently issued our 
annual FISMA report, which is required by law, which assesses 
the overall state of USDA's IT security initiatives. In the 
last 3 years, we have made 43 recommendations to the Department 
in the context of these FISMA audits to help the Department 
remedy long-standing challenges in IT security. Though the 
Department has only been able to close six of these 43 
recommendations, the Department continues to work towards 
resolving the issues that we have identified.
    So I would like to conclude my statement and again thank 
you for the opportunity to be here today and to engage in 
dialogue with you on these issues. And we welcome any questions 
that you might have.
    [The prepared statement of Ms. Fong follows:]

  Prepared Statement of Hon. Phyllis K. Fong, Inspector General, U.S. 
              Department of Agriculture, Washington, D.C.
    Good morning, Mr. Chairman, Ranking Member Fudge, and Members of 
the Subcommittee. I am joined by Gil Harden, the Assistant Inspector 
General for Audit and Karen Ellis, the Assistant Inspector General for 
Investigations. Thank you for the opportunity to update the 
Subcommittee on the Office of Inspector General's (OIG) work on 
preventing fraud in the Supplemental Nutrition Assistance Program 
(SNAP) and reviewing the Department's information technology (IT) 
programs for compliance with all applicable laws and regulations.
Database Analysis to Reduce SNAP Fraud
    As part of our ongoing efforts to help minimize fraud, waste, and 
abuse within SNAP, OIG is performing a series of audits analyzing ten 
states' participant databases.\1\ These databases store critical 
information which helps identify ineligible participants who are 
receiving benefits. Detecting and investigating program violations is 
one of the state agencies' primary responsibilities. State agencies are 
required to check their information against Federal and state databases 
to ensure, for example, that people using deceased individuals' Social 
Security Numbers (SSN) do not receive benefits, or that their submitted 
income is the same as is listed in official records. If applicants do 
not meet eligibility requirements at the time of application or on a 
recurring 6 to 12 month basis, state agencies are required to 
disqualify them. Doing so ensures that taxpayer dollars go to those who 
are truly in need.
    \1\ The ten states are Alabama, Florida, Kansas, Louisiana, 
Massachusetts, Mississippi, Missouri, New Jersey, New York, and Texas.
    To monitor state agencies' progress in identifying and preventing 
improper payments, we checked several of these databases ourselves. We 
have completed work in two states--Kansas and Florida--and found a 
total of 3,572 recipients who were receiving potential improper 
payments: \2\
    \2\ Kansas: 883; Florida: 2,689.

   878 recipients were either deceased or using the SSNs of 
        deceased individuals.\3\ State agencies did not investigate 
        individuals using the SSNs of deceased persons due to a backlog 
        stemming from increased participation in SNAP in recent years, 
        as well as a system crash. Additionally, some recipients 
        received benefits because state agencies only checked state 
        death records, which do not identify deceased participants who 
        died in a different state, instead of checking against the 
        required national Social Security Administration database.
    \3\ Kansas: 71; Florida: 807.

   160 active participants were previously disqualified from 
        receiving SNAP benefits.\4\ One of the most basic ways to 
        protect against SNAP fraud is to prevent intentional program 
        violators from reenrolling, but FNS does not require states to 
        check FNS' database of disqualified participants before 
        admitting them into SNAP.\5\ We found that because of this 
        policy, in Florida alone, 160 participants who had previously 
        been disqualified in other states were actively receiving SNAP 
    \4\ Florida: 160.
    \5\ FNS uses a database known as the Electronic Disqualified 
Recipient System (eDRS).

   973 participants received dual benefits simultaneously from 
        another state for 3 consecutive months.\6\ Of these, 165 were 
        enrolled in both states for 6 months or longer \7\--and one was 
        a dual participant for a year and a half.\8\ This occurred 
        because, at present, FNS does not have a nationwide database of 
        participant data. Instead, the states, at their own discretion, 
        utilize an optional, multi-state system, which results in 
        significant gaps in coverage. For example, even though Florida 
        utilizes this system, it did not know that 370 SNAP 
        participants were simultaneously receiving benefits in Alabama 
        because Alabama does not participate in the system, and thus 
        the system does not contain Alabama's data.
    \6\ Kansas: 90; Florida: 883.
    \7\ Kansas: 58; Florida: 107.
    \8\ Kansas: 1.

   1,555 individuals had invalid SSNs.\9\ The states did not 
        always check their own databases for anomalies, which increased 
        the risk of improper payments to individuals with invalid SSNs. 
        Agencies attributed most of these errors to data entry errors 
        or incorrect SSNs provided by participants. With potentially 
        incorrect information, it is difficult for states to determine 
        which participants may be intentionally manipulating the 
    \9\ Kansas: 720; Florida: 835.

   6 individuals were receiving dual benefits under two 
        separate accounts.\10\ State agencies determined that a rare IT 
        system issue created dual records, but were unable to diagnose 
        the cause.
    \10\ Kansas 2: Florida: 4.

    Participants in Kansas receive on average $124.40 in benefits a 
month, while participants in Florida receive an average of $141.40 a 
month. We estimate that these 3,572 recipients could be receiving a 
total of $490,070 a month.\11\
    \11\ $109,845 in Kansas; $380,225 in Florida.
    Databases provide some of the most comprehensive and robust 
information for fraud detection. However, we found that because state 
agencies do not fully utilize them--even when they are required to do 
so--they may continue to issue SNAP payments to those who are not 
entitled to receive the benefit.
    Taken within the context of SNAP as a whole, our findings to date 
do not represent large monetary sums, but they do show areas where FNS 
and the states could make progress in reducing potential improper 
payments. Moreover, as FNS strives to bring its rate of improper 
payments below three percent, it will need to make use of data analysis 
as a straightforward way of identifying payments that should not be 
made. OIG is in the process of completing similar data analysis audits 
in another eight states.
    In our reports, we have recommended that FNS require the Florida 
and Kansas agencies to ensure they use a national database to perform 
death matches and SSN verifications, and that they perform checks to 
make sure information is entered correctly. We also recommended the 
state agencies review the individuals we identified and recover 
improper payments, as appropriate. Generally, FNS agreed. To prevent 
interstate dual participation, the agency is in the process of 
implementing regional databases. FNS also encourages states to check 
for interstate dual participation by using the optional national 
database, but notes that some states feel the information in this 
database is not timely. FNS has not yet provided timelines to implement 
checks for dual enrollment, which we require to reach agreement on 
management's decision for corrective action.\12\
    \12\ Audit Report 27002-0002-13, ``Analysis of Florida's SNAP 
Eligibility Data'' (November 29, 2011) and Audit Report 27002-0001-13, 
``Analysis of Kansas' SNAP Eligibility Data'' (November 23, 2011).
    Additionally, we have found that FNS needs to take measures to 
ensure that other information used in fraud detection efforts is 
accurate and reliable. In one audit, we found that the files used to 
back up FNS' Anti-Fraud Locator Electronic Benefit Transfer (EBT) 
Retail Transaction system, which stores the data from EBT transactions, 
were incomplete and disorganized, which could hinder fraud detection 
efforts. As a result of our audit, FNS has agreed to strengthen system 
controls, including system redesigns and upgrades by June 2012.\13\
    \13\ Audit Report 27002-0001-DA, ``Analysis of Supplemental 
Nutrition Assistance Program ALERT Database'' (November 22, 2011).
OIG Investigations of the Illegal Trade in SNAP Benefits
    Just as there are individuals willing to misrepresent themselves to 
receive benefits, so there are individuals and retailers who illegally 
exchange food benefits for cash or other commodities. For example, by 
giving a recipient $50 in cash for $100 in benefits, an unscrupulous 
retailer can make a significant profit; recipients, of course, are then 
able to spend the cash however they like. In some cases, recipients 
have exchanged benefits for drugs, weapons, and other contraband. Not 
only does this illegal exchange interfere with FNS' ability to 
efficiently use its resources to feed hungry families, but it 
undermines the goal of providing nutritional and wholesome food to 
those in need.
    In FY 2011, OIG devoted about 46 percent of its investigative 
resources to SNAP-related criminal investigations. In that year, our 
investigations resulted in 179 convictions and monetary results 
totaling $26.5 million. In recent months, OIG has concluded a number of 
SNAP investigations, including the following:

   A judge recently ordered a Brooklyn store owner to serve 2 
        years in jail and pay $1.4 million in restitution for 
        defrauding SNAP. From September 2007 to September 2009, OIG 
        agents exchanged a total of $2,664 in SNAP benefits for $1,875 
        in cash in a series of transactions demonstrating that the 
        owner was in the habit of trafficking in SNAP benefits. 
        Subsequent investigation and analysis of financial data 
        demonstrated that the store's fraudulent SNAP transactions 
        amounted to approximately $1.4 million. In 2009, the store 
        owner and her son were charged with conspiracy to commit SNAP 
        trafficking. The store owner pled guilty and was sentenced to 
        24 months' imprisonment and ordered with her son to pay 
        restitution of approximately $1.4 million and forfeiture in the 
        amount of $105,524. The owner's son fled, but he was 
        apprehended in Florida in July 2010. He pled guilty in December 
        2010, and in June 2011, was sentenced to 15 months' 

   After being deported from the United States for food stamp 
        fraud in the 1990s, one criminal illegally re-entered the 
        country in 2000 and resumed EBT fraud. With the assistance of 
        an accountant, this individual opened several stores using 
        other individuals' names. The false owners of these stores 
        signed their names on FNS documents to obtain authorization to 
        accept SNAP benefits, but the subject, his wife, and his 
        brother actually operated these stores. Subsequently, an OIG 
        investigation resulted in the subject and his brother being 
        charged with fraud. In June 2011, the owner was sentenced to 57 
        months of incarceration, 3 years of probation, and restitution 
        of $1.7 million, and will again be subject to deportation. His 
        brother was sentenced in May 2011 to 21 months of 
        incarceration, 12 months' probation, and restitution totaling 
        $362,764. Court actions are pending against the store owner's 

   In Cincinnati, a 2 year joint criminal investigation led by 
        OIG disclosed that the owner, manager, and employees of two 
        SNAP-authorized retailers exchanged SNAP benefits for firearms, 
        cash, stolen tobacco products, narcotics, and drug 
        paraphernalia. In April 2011, two store employees, who were 
        brothers, were sentenced to 51 months' incarceration followed 
        by 3 years' supervised release, and were ordered to pay fines. 
        Their mother was sentenced in May 2011 to time served, 6 
        months' home confinement, and 3 years' supervised release after 
        agents found EBT cards in her purse while searching for 
        evidence involving her sons' illegal SNAP trafficking. Their 
        father was sentenced to probation in September 2011 after he 
        pled guilty to SNAP fraud and receipt of stolen property. One 
        of the store owners and a manager are scheduled to be tried 
        criminally later this year for illegal use of SNAP benefits.

    OIG continues to work with FNS to develop new ways of detecting and 
investigating retailers at high risk of committing such fraud. In 
particular, we are engaged in ongoing discussions with FNS to identify 
ways to leverage resources with state and local partners so that they 
may better address fraud involving both retailers and recipients.
Improving USDA's IT Systems
    OIG continues to provide oversight to ensure that the Department 
efficiently and effectively utilizes the funds it was provided to 
update its IT infrastructure. In FY 2010, the Office of the Chief 
Information Officer's (OCIO) baseline budget was increased from $17 
million to $61 million for security improvements within the Department. 
Anticipating a total of $64 million in FY 2011, USDA pursued a total of 
14 projects that year, including network monitoring and establishing a 
24/7 security operations center. However, in April 2011, the passage of 
a final continuing resolution resulted in a decrease in overall 
appropriations available for the remainder of FY 2011. OCIO received a 
total of $40 million for FY 2011--$23 million more than in FY 2009, but 
$24 million less than what it anticipated. OIG is in the process of 
determining how OCIO used the additional funding it received, and if 
the additional funding resulted in improved security. We can state, 
based on our work to date, that the 14 projects initiated with this 
additional funding appear to have been significantly curtailed or 
delayed. In one example, with a decreased budget, USDA halted work by 
contractors to implement a $3.6 million software package. With the 
project not yet operational, and without access to the administrator 
account, the Department effectively found itself unable to use the 
software tool.
    Apart from this ongoing audit, OIG routinely monitors the state of 
IT security at USDA. Each year, we conduct our mandated review of the 
Department's compliance with the Federal Information Security 
Management Act (FISMA). Bringing USDA's IT infrastructure into full 
compliance with all applicable laws and regulations is a formidable 
challenge, as the Department includes 33 agencies, most with their own 
IT infrastructure, and operates a total of 257 discrete IT systems. In 
FY 2011, USDA spent a total of $2.5 billion on IT-related expenses to 
maintain, upgrade, operate, or replace these systems.
    The Department requires this infrastructure to process and manage 
the vast amounts of information needed to deliver benefits and services 
to the American public. However, overseeing such a diverse array of 
technology presents problems for any organization, and USDA is no 
exception. Since 2009, OIG has made 43 recommendations, including ten 
from FY 2011, intended to help the Department remedy longstanding 
deficiencies in its IT security. Though the Department has closed only 
six of these 43 recommendations, it continues to work on resolutions 
for the remaining open recommendations.
    As part of our FY 2011 FISMA review, OIG noted that OCIO has tended 
to attempt too many IT projects at the same time, which has resulted in 
USDA not meeting its project milestones. Given OCIO's tendency to 
disperse its efforts over a wide field--and thereby dilute their 
effect--we have recommended that OCIO prioritize its work on a few 
projects, and focus on completing those projects. To some extent, OCIO 
has responded. For example, in response to issues we reported 
previously, the Department installed a cyber security incident 
detection toolkit this year--this system should help USDA detect and 
respond to intrusions in its data systems. With appropriate resources, 
the Department can analyze up to 150 alerts to potential cyber attacks 
per week. OCIO, however, faced a decrease in its budget for this 
project, and was forced to reduce the personnel it relied on to perform 
this work. Now, it analyzes about 15 alerts weekly.\14\
    \14\ Audit Report 50501-0002-12, ``U.S. Department of Agriculture, 
Office of the Chief Information Officer, Fiscal Year 2011 Federal 
Information Security Management Act'' (November 15, 2011).
    OIG also has issued a number of recent reports dealing with IT 
problems in the Department, several of them dealing with contractors. 
Federal IT projects have historically involved contractors, but USDA 
has not always adequately overseen the contracts it relies on to 
fulfill its IT requirements. For instance, our audit of USDA's Domain 
Name System (DNS) revealed that OCIO needs to improve how it oversees 
the contractors who operate this critical system, which routes Internet 
traffic through the network.\15\ Like any other distributed computing 
system, USDA's system is susceptible to platform-, software-, and 
network-level vulnerabilities. OIG reviewed the Department's management 
and security controls to protect the integrity, validity, and 
availability of the information that travels across USDA's network. We 
found that OCIO has not always been diligent in ensuring that the 
management and security over DNS was adequate. Ultimately, these types 
of problems leave the Department open to cyber attacks and the 
potential destruction or theft of valuable and private data.\16\
    \15\ DNS is a data communication mechanism that translates Internet 
Protocol addresses into easy-to-understand website names, allowing 
users to navigate using a website name such as www.ocio.usda.gov rather 
than a series of numbers such as
    \16\ Audit Report 50501-0001-12, ``Fast Report--Critical Domain 
Name Systems (DNS) Servers'' (April 15, 2011).
    USDA, like other Federal agencies and private companies, is also 
facing challenges concerning integrating new technologies in a way that 
furthers the Department's mission while also meeting the most rigorous 
IT security requirements. The Department's employees are increasingly 
reliant on smart phones or other wireless handheld devices, but these 
powerful devices bring with them new security problems related to their 
portability. OIG reviewed 277 of USDA's approximately 10,000 wireless 
handheld devices, and found that all of these 277 devices were not 
adequately secured, as defined by guidance issued by the National 
Institute of Standards and Technology. For example, we found wireless 
handheld devices that were not password-protected, had no anti-virus 
software installed, and were not configured to encrypt removable media. 
We also found that all 22 of the Department's Blackberry servers were 
not secured in accordance with Departmental guidance, which allowed 
users to disable their passwords or bypass the Department's Internet 
content filters. Ultimately, these problems occurred because OCIO took 
a decentralized approach to deploying these devices (allowing 
individual agencies to select and deploy smart phones) without 
providing clear guidance and oversight on how to configure and secure 
them, which resulted in inconsistencies.\17\ OCIO accepted our 
    \17\ Audit Report 50501-0001-IT, ``USDA's Management and Security 
Over Wireless Handheld Devices'' (August 15, 2011).
    This concludes our written statement. I want to again thank the 
Chair and the Subcommittee for the opportunity to testify today. We 
welcome any questions you may have.

    The Chairman. Thank you, Ms. Fong. Did Ms. Ellis or Mr. 
Harden have any further input?
    Ms. Fong. Are you asking if they have an opening statement?
    The Chairman. Yes, I am sorry. Okay. Well, thank you.
    First of all, let me do a little housekeeping with you. 
Back in June when we had our earlier hearing, it was suggested 
to us in response to your suggestion, Ranking Member Fudge and 
I wrote you a letter looking forward to a follow-up hearing 
this fall. We have had some difficulty scheduling this and now 
we only have preliminary data. Our expectation was that we 
would have a complete set of data based upon the questions that 
I raised earlier. It is important for us to just clear up this 
matter as to why there has been delay and difficulty in 
scheduling this hearing and how you prioritize your own 
internal resources in this regard.
    Ms. Fong. Well, thank you for raising that issue. When we 
appeared last summer and we engaged in a colloquy on our 
ongoing and planned work, at that time our office did say to 
you that we anticipated having final reports in the fall of 
2011. And we certainly said that and that was our plan. I will 
say to you that managing audit work is an art and not a 
science. And we had work plans in place to accomplish that work 
and that was where we believed that we would be.
    Now, I will say that sometimes when we start out with 
audits and we initiate them and we are involved in a number of 
states, there are issues that come up that we do not always 
anticipate. And sometimes there are bumps in the road in terms 
of finding issues that we had not anticipated finding that we 
need to follow through and work and analyze. We need to make 
sure that we understand the data that we are being given which 
may involve additional interviews, coordination with program 
officials who have priorities in terms of delivering programs 
which are very essential to them. And so on occasion, our audit 
time frames slip.
    Now, I will also say that we have other mandatory work that 
we are required to do. As I might have noted, we have just 
completed the financial statement audits for the Department 
which are required by law. Those are seven very intensive audit 
efforts that were due on November 15 which involve many of the 
same staff involved in our IT work. And so we have had to shift 
and move and organize our work.
    We recognize the importance that you put on these audits, 
and because of your interest and your follow up with us, we 
sped up our audit work on both the SNAP and the IT matters so 
that we were able to issue in the last few weeks the three 
audit reports on SNAP that are covered in my testimony and the 
FISMA report, which is in the IT arena.
    So while I understand your concern and I will say that we 
did make that commitment, we are doing our very best to get 
this work out in as timely a manner as we can keeping in mind 
the need for high quality and for accurate data.
    The Chairman. Thank you for that. I think I have 
sufficiently pressed my point that we depend upon you. We can't 
do this ourselves. This Committee is going to take its work 
very seriously. I think perhaps a middle ground here would be 
as we move forward and we are looking for--we have to have some 
idea of firm timelines when things are going to be completed. 
If there is slippage because of other constraints, timely 
communication in that regard would be helpful but also maybe 
phasing some of the information would also be helpful in 
allowing us to see a snapshot of what may be coming before the 
fullness of the report is issued.
    And that is clearly what we have today, so thank you for 
your response and we will look forward to continuing to 
strengthen this friendship and working relationship.
    Let us go to the specifics of your findings: Talk a little 
bit more about the subset of data that you do have and the 
problems that you found, particularly in this SNAP trafficking 
issue, and then extrapolate from the subset the dollars 
potentially involved in the entire system there due to these 
problems. In other words, you have a subset of data here, but 
what we need to do--I understand it is going to be preliminary 
and offend your sensibilities as policy analysts and audit 
experts to talk in too precise terms here, but nonetheless, 
this is the only data that we have. So I would like to 
extrapolate from what you have to an understanding of what this 
says about our system as a whole in terms of the waste or fraud 
that is out there, particularly this SNAP trafficking problem 
which you highlight.
    Ms. Fong. Okay. Let me just make a few preliminary comments 
and then I will turn to my colleagues to elaborate in more 
    As you note on the SNAP program, we have issued the first 
two of our ten reports dealing with individual states, and what 
we plan to do once we finish the other eight state reports is 
to issue a rollup report that will bring together the findings 
and trends for FNS in one package in terms of recommendations 
for action. And I will let Mr. Harden address that in a little 
more detail.
    On the trafficking side----
    The Chairman. Why don't we do this? Why don't we hold that 
question for a moment? I know the Ranking Member is a bit 
pressed for time because of another consideration, so if you 
would like to go ahead and ask a few questions now.
    The Chairman. No? Are you fine?
    Ms. Fudge. Yes.
    The Chairman. Okay. Well, please continue.
    Ms. Fong. On the trafficking side, we are looking and 
addressing trafficking in the context of criminal 
investigations where there are allegations that individuals are 
taking advantage of the system and abusing them. And so we 
handle criminal investigations to go after those situations. 
Trafficking does not normally arise in the context of our audit 
work, and so I will ask Ms. Ellis if she would like to provide 
some comments on the trafficking work that our office does.
    The Chairman. Well, why don't we do this? Why don't we 
actually define the types of fraud that are out there? This is 
one. And then from there, based upon what you have found, the 
collective impact on the system of this subset and then your 
approximation as to what this would mean in terms of the total 
loss in effect to the system. That is what I would like to 
    Ms. Fong. Okay. I think that is Mr. Harden's side of the 
    Mr. Harden. In terms of the dollar amounts that we have in 
the reports, we limit it to 1 month. I want to explain the 
reason for that. There are limitations in the states' data 
systems that we can't backtrack to when the actual improper 
payments or potential improper payments started. So there is 
not a way to project a whole amount for a year or something 
like that. And it is not a statistically designed sample 
review, so there is not a way to project those kind of things.
    But in terms of the collective impact on a program, what we 
are seeing with what we are doing in the states, as well as 
what we have done other places, is that states aren't using the 
tools that they already have available to look for fraud 
    The Chairman. You said they are not?
    Mr. Harden. They are not using them. There are these tools 
such as the death match with Social Security and the things 
that we have itemized in the testimony, but there are also 
other reports that they have available to them. I mean each 
state has an EBT processor. There are certain EBT management 
reports that are produced that will tell, as an example, that 
if you are supposed to be a resident of the State of Florida 
but you are using your benefits in Georgia that it will tell 
you that they are being used out of state. And with that data, 
the state personnel can go and figure out has the person moved 
or are they getting duplicate benefits? So I mean there are 
more ways that if the states were doing more work with the 
information, they would be finding probably more and more 
improper payments.
    The Chairman. Okay. I will try one more time. You have to 
get us to some--I know the problems with preliminary data. I 
understand that you are going to have some difficulty assigning 
some valid statistical measure at this point to be able to 
provide precisely what I am asking, but an estimate of the 
total impact here would be helpful, understanding it is very 
    Mr. Harden. We have had discussion over the years with FNS 
as to how they estimate a fraud rate, which I have not, through 
those discussions, completely understood how they come to their 
number. I don't know how to say if it is one percent or half of 
a percent of the whole program. I know that every time that we 
have gone out and looked and whether the proper oversight was 
being given to the program, there have always been improper 
    The Chairman. Okay. So the largest way to define improper 
payments or the best way to categorize it is in these key areas 
that you have talked about--deceased persons whose numbers are 
being lifted or used by someone else, those previously 
disqualified that are not being culled from the system, dual 
    Mr. Harden. Yes.
    The Chairman.--and invalid Social Security Numbers. Are 
those the main categories of----
    Mr. Harden. Those are the main categories that we have seen 
to date. There is also work that FNS does through their quality 
control reviews at states that also let them know how well the 
states are originally issuing the benefits. And that is like 
    The Chairman. You mean determining qualifications properly?
    Mr. Harden. Yes. And that is the error rate that you see 
going down even though there are more participants on the 
    The Chairman. Okay. Ms. Fong, can you help here? Is there a 
way again to get to some collective impact based upon this 
subset of data?
    Ms. Fong. Let me see if I can offer some comments. What I 
believe we found in Florida and Kansas, when we designed our 
audit program, we looked at the data and we started to focus in 
on these four or five situations that you mentioned. And based 
on our analysis of those four or five areas, we found that 
perhaps--and I don't recall the exact percentage--somewhere 
between .3 and 1 percent of the recipients may have been 
ineligible. Now, that percentage is less than the overall 
improper payment rate in the SNAP program as a whole, which I 
believe last year was at 3.6 percent. And so what that seems to 
indicate to me is that while this is an area that we should 
focus on and work with FNS on in terms of addressing, it may 
not be the key driver in the improper payment rate in the 
program. Now, we don't know enough to really conclude that.
    The Chairman. Okay. Well, that is helpful. I have taken a 
lot of time--let me turn to the Ranking Member first. But we 
will come back to that point to talk about what are the other 
potential key drivers, as well as this SNAP trafficking issues 
that I would like to go into deeper.
    Ms. Fudge. Thank you, Mr. Chairman.
    Inspector General, in June we discussed the lack of 
coordination between departments regarding the suspension and 
debarment for individuals and entities in violation of program 
rules. Now, based upon your answers in June, I am convinced 
that this issue really has not received the kind of attention I 
would like to see it receive. Would this be an appropriate 
matter to bring to the attention of the Council of Inspectors 
General, and if so, how can I help you do that?
    Ms. Fong. Thank you very much for your support on 
suspension and debarment. This is an issue that all Inspectors 
General feel very strongly about because we believe it is a 
critical tool that agencies should use to make sure that people 
are not participating in programs where they have been 
adjudicated to be bad actors or otherwise deemed not 
    I would be very happy to work with you and your staff on 
this. The Council of IGs has engaged in a number of projects to 
raise the issue of suspension and debarment government-wide, 
and I believe that one of our IGs is testifying on the Senate 
side in the very near future on these issues. And so we 
certainly have an interest in this and welcome your support on 
    Ms. Fudge. Thank you. I would be happy if you would contact 
my office so that we can at least try to move this a little 
faster than I think it has been to this point.
    In your testimony, you referenced audits that analyze SNAP 
participant databases in ten states. When analyzing data in 
Florida and Kansas, your office found 160 active participants 
who were previously disqualified from receiving SNAP benefits. 
You also found that 973 participants received simultaneous 
benefits from at least two states. You noted failures by FNS 
that perpetrate this kind of fraud. The issue seems to be the 
absence of a national database and no requirements that states 
check the FNS database before admitting SNAP participants. Is 
your office working with FNS to remedy these issues?
    Mr. Harden. Yes, ma'am. Those are some of the exact issues 
that we will be working with them as we have identified them 
now and also as we roll up the results since we have the 
results of all ten states to have that dialogue with them about 
it is a way to move to a national database and requiring that.
    Ms. Fudge. So you are saying once you get the data, you 
will be working with them; but, you aren't now?
    Mr. Harden. No, we are now----
    Ms. Fudge. Okay.
    Mr. Harden.--as part of our work. It is a question that we 
need to make sure--it is not isolated to one or two states. It 
is confirmed that it is in the majority of the states that we 
are looking at.
    Ms. Fudge. And at some point, could you get my office some 
update on what your progress has been in that effort?
    And also, what is the protocol when OIG discovers 
substantial system failures that need to be cured by FNS?
    Mr. Harden. In general, our reporting process if we go 
through audit work and see something of great significance that 
needs to be addressed immediately during our work, we issue 
what we call a fast report. We issue that to the agency and ask 
for a response to specific recommendations in 5 days. Then, 
that report can become public and shared widely because it has 
been reported and responded to. Those types of issues will then 
be later rolled up into a summary report at the end of the 
audit work.
    Ms. Fudge. And who is responsible for ensuring that the 
failures are remedied? Whose responsibility is that?
    Mr. Harden. The agencies are responsible for developing----
    Ms. Fudge. But who oversees it and says you didn't do it or 
you did do it, who does that?
    Mr. Harden. The process for closing recommendations is we 
would make the recommendation to the agency, they respond, and 
we then agree on their corrective action plan and the time 
frame that they are willing to do that in.
    Ms. Fudge. When you say we, you mean the Inspector General?
    Mr. Harden. The Inspector General's office and the agency. 
Once we have reached that agreement, it is then transferred in 
the department to the Chief Financial Officer's office that 
tracks those through closure. As I understand the process of 
the CFO's office, there are people that are dedicated to making 
sure the agencies are meeting those time frames. When they do 
not meet those time frames, there is follow up by the CFO. If 
an agency sees that it can't do what it agreed to do with us, 
they are required to let OCFO know and come back to us and ask 
if we can have a change in the plan. And then we will have to 
have a dialogue at that point and see whether we can agree with 
that or not.
    Ms. Fudge. And what is that total time frame?
    Mr. Harden. Once we have agreement on the recommendations, 
which we try to do in no less than 6 months, they are supposed 
to try and get the final corrective action done in a year.
    Ms. Fudge. It seems like an awful long time to me, but 
thank you, Mr. Chairman. I yield back.
    The Chairman. Mr. McGovern?
    Mr. McGovern. Thank you, Mr. Chairman. And Inspector 
General Fong, thank you very much for being here.
    All of us here are very much committed to eliminating 
fraud, waste, and abuse not only in the SNAP program but every 
program that the government oversees. But I do think it is 
probably worth stating that the USDA deserves a little bit of 
congratulations for continuing to lower the error rate in terms 
of SNAP. I mean if only the Department of Defense ran their 
programs as efficiently and effectively as this program, I 
think we would all be a heck of a lot better off. We could save 
a lot more money and put it toward deficit reduction.
    But the error rate here continues to go down. That is a 
good thing. And when we talk about the error rate up to this 
point we have been talking about overpayments and people taking 
advantage of the system, but part of that error rate includes 
underpayments. Am I not correct? In other words, the examples 
where people are not getting what they are entitled to, how big 
of a deal is that in terms of the audit? Where does that fit in 
in terms of your data?
    Mr. Harden. In terms of the work that we are doing in the 
individual states, we are not necessarily looking at the 
underpayments because that is really more of the QC process. 
That is not part of what we are looking at now. I would have to 
go back and look at the numbers that are reported in terms of 
    The Chairman. Will the gentleman yield?
    Mr. McGovern. Yes.
    The Chairman. UC? What did you say? The UC process?
    Mr. Harden. Oh, the QC, the quality control process that 
FNS has.
    The Chairman. No acronyms, please.
    Mr. Harden. Okay.
    The Chairman. I have a no-acronym policy in my office----
    Mr. Harden. Sorry.
    The Chairman.--so we can all understand what we are talking 
about. Sorry. Excuse me, Mr. McGovern.
    Mr. McGovern. Thank you. And the reason why I think that is 
an important thing to look at is when we are trying to look at 
what is the net plus in terms of monies that can be saved 
through cracking down on fraud and abuse. What I was just 
trying to figure out is: is the money that is going out to 
people where it shouldn't, where does that fit in with the 
monies that should be going out to people that they are not 
getting? But are underpayments an issue in terms of the error 
    Why aren't the states doing a better job? Is it because 
they are overwhelmed or because they are understaffed, or is it 
because they don't care or don't feel that they need to be 
better overseers here? What is your opinion on that?
    Mr. Harden. The reasons we have heard thus far go back to 
resource issues. The state agencies are charged with both 
delivering the program and also providing the oversight, and so 
it is their juggling of their resources. And that is part of 
what we want to continue to talk to the different states, as 
well as FNS, about and see what is the proper balance that FNS 
is expecting the states to be doing.
    Mr. McGovern. I know in my State of Massachusetts, the 
number of people who are eligible for SNAP has increased as the 
economy has gotten worse. I think it is also important to state 
that yes, SNAP and nutrition programs are a big part of USDA's 
budget but if the economy gets better, then fewer and fewer 
people need the benefit and then it goes down. But in my State 
of Massachusetts, because of the increase in people who are 
eligible, they have had a staffing problem being able to keep 
up with the applications and being able to process everything. 
You know, and there is really no other way around their dilemma 
other than additional staffing. Yet, we continue to talk about 
reducing the program. In order to deal with some of the fraud 
issues and some of the efficiency issues, you do need 
appropriate staff at the state level. Is that what you are 
finding as well?
    Mr. Harden. Yes, sir. That is true.
    Mr. McGovern. You know, we talked about some of the scams 
that have been going on. I just saw an article today about this 
new phenomenon called fake food stamp websites preying on the 
poor about people who have set up these websites and scams to 
tell people who may be eligible for food stamps or for SNAP 
getting them to pay a fee in exchange for information, are you 
following this at all?
    Ms. Ellis. We are aware that that is a problem and I do 
believe that we have been talking about this with FNS. They are 
aware of it, too, and are trying to put in some procedures to 
detect and to prevent that.
    Mr. McGovern. I know my time is running out here but let me 
just make a point. One of the reasons why I wanted to stress 
the efficiency of this program is because I think there is a 
mindset amongst some that this program is not run very 
efficiently and that there are lots of taxpayer dollars that 
are being wasted. I don't buy that, but clearly the error rate 
is low. Yes, there are places that need to be tightened up--and 
I know you don't run the program--but I think it is important 
to point out that there are some here who view the SNAP program 
as kind of an ATM machine to pay for all our other programs 
here. We dipped into the SNAP program to pay for teachers a 
year and a half ago. We dipped into the SNAP program to pay for 
the Child Nutrition Reauthorization Act. And the way we are 
figuring it out right now is that for a family of four, right 
now they get around $288 a month. And based on the cuts that 
have already been made, it would go down to somewhere around 
$220 a month.
    The other important point to be focused on here is to 
ensure that people get a benefit that actually meets their 
needs and that the way that you get to additional efficiencies 
may not necessarily be by cutting. In some cases, we may need 
to be adding staff to do proper oversight. I will close with 
one other question.
    Senator Kyl announced that he was looking at SNAP as a 
potential offset to pay for the extension of a payroll tax cut, 
but he says that there are some people who earn more than $1 
million in income who are eligible for food stamps. Based on 
your understanding of the program, if you make a million 
dollars a year, are you eligible for food stamps?
    Mr. Harden. That is not my understanding.
    Ms. Fong. I think under the SNAP regulations that a person 
with an income of a million dollars would not normally qualify, 
but there are, as you know, other provisions in terms of 
categorical eligibility where that may come into play or there 
may be asset tests--if it is an asset as opposed to income, 
that may be another factor.
    Mr. McGovern. Right, and there are income eligibility tests 
and asset tests, but I think it would be helpful if you could 
give us some clarity on whether or not millionaires are getting 
SNAP benefits or not. You know, it is hard for me to imagine 
that somebody who has assets of over a million dollars is 
eligible for SNAP, but I mean if you find that I would like to 
know about it. If you don't, I would like to know about that, 
too, because again it leaves the impression that somehow there 
is massive abuse of this program. And based on what you have 
told us so far, that is not the case. There is some abuse but 
it is not at a level comparable to some of the defense 
contracting practices that we have in this country.
    So in any event, any information on that would be very 
helpful to have. Thank you.
    The Chairman. Thank you, Mr. McGovern. I think it is 
important to point out the SNAP program has doubled in 
expenditures in the last 4 years. But to the gentleman's point 
that it might be helpful if we did have a type of spreadsheet 
that showed all those states' qualification requirements based 
upon the criteria that you just said. There is a general 
requirement by Federal statute, the general parameter or the 
general eligibility standard and then the variation by states. 
That might get to this point as to whether asset considerations 
are a part of certain states' requirements or not and that 
might be helpful information.
    Ms. Fong. We would be happy to talk with our colleagues at 
FNS. They may very well have that information and we will see 
what we can do to work with you on that.
    The Chairman. Thank you. I will turn now to Mr. Crawford.
    Mr. Crawford. Thank you, Mr. Chairman. I just want to ask a 
few quick questions about duplicative benefits. In your 
database analysis, did you look at duplicative SNAP benefits 
being given out to individuals with similar names and 
    Mr. Harden. I would have to go back and look at our exact 
methodology. That is not one that comes to the top of my head 
in terms of tests that we perform.
    Mr. Crawford. Okay. If there were similarities, how would 
FNS go about working through possible duplicative benefits to 
the same individual?
    Mr. Harden. Well, the way we identified those was in the 
database. You would be able to identify a person with the same 
Social Security Number and they are receiving two sets of 
    Mr. Crawford. Okay.
    Mr. Harden. So we would know that there was duplication.
    Mr. Crawford. Okay, so just based on their Social Security 
    Mr. Harden. Yes.
    Mr. Crawford.--you are pretty comfortable with that? Okay. 
And so that would answer my next question. How does SNAP work 
through discrepancies if there were similar names? You are 
basing this solely on a Social Security Number?
    Mr. Harden. For that particular one, yes.
    Mr. Crawford. Okay. How do you propose FNS would improve 
the current initial eligibility and approval process?
    Mr. Harden. Well, that is some of what I said before. That 
is part of the questions that we are working on with them. We 
are working on the ten individual states right now. We have 
issued two. As we are working with the remaining eight, we are 
also talking to FNS about the findings we are seeing in each of 
the states and what improvements can be made at the national 
level and what the expectation of what they would want the 
states to do.
    Mr. Crawford. Okay. Let me ask you do you think that it is 
possible there might be an opportunity to integrate commercial 
databases available in the private sector to help more 
efficiently manage?
    Mr. Harden. Let me go and look at that and see how it is 
done because similarly I think--or what is occurring to be 
similar to me is the electronic benefits transaction processors 
that work with each state are commercial entities that provide 
databases. And so there may be a way to integrate them into 
that as well.
    Mr. Crawford. Okay. In your opinion, do you think FNS can 
respond to all of the recommendations that were made without 
legislative changes?
    Mr. Harden. Right now, my understanding is there is not a 
need for an additional legislative change, but that is 
definitely part of the questions that we will be discussing 
with them as we work towards recommendations.
    Mr. Crawford. Okay.
    Ms. Fong. Let me just make a comment on that. They have 
agreed to take action on virtually all of our recommendations 
and they have not indicated to us that legislative action would 
be necessary in order for them to do that. I think it is our 
understanding and theirs that they are able to proceed.
    Mr. Harden. I guess another part of that point, too, is the 
findings that we are having is that they are not using the 
Social Security death match list, they went out with a notice 
to the states in mid-November reminding the states that that is 
a requirement that they are supposed to use that. And they are 
also preparing to go out with a final rule in early 2012 to 
address that point as well.
    Mr. Crawford. Okay. In what little time I have left, let us 
switch gears a little bit. USDA received $50 million in the 
Recovery Act for information technology improvements, and you 
released an audit report earlier this year on whether the funds 
were spent according to the requirements of the Recovery Act. 
But as discussed at the June 2 hearing, we would be interested 
in knowing whether those funds resulted in better program 
delivery for our constituents. Are you looking into that issue?
    Mr. Harden. As part of that particular audit, we did not 
see any problems with program delivery. The things that we saw 
were reporting requirements related to the Recovery Act.
    Mr. Crawford. Okay. I yield back.
    The Chairman. Thank you. Let me follow up on the earlier 
questioning that I had regarding the problem with states not 
discerning properly or using systems to discern properly 
whether deceased individuals' SNAP benefits were being lifted, 
disqualifications, dual benefits, as well as people who have 
invalid Social Security Numbers. You were saying that that is 
probably accounting based upon again this preliminary data for 
half a percent to one percent of the total fraud rate. The 
presumptions of which were based upon--I would like to hear you 
further speak to this--is about a four percent overall 
problematic rate of use of program funds. So identifying the 
other factors involved here is where we left off our 
conversation. So if you could do that.
    Ms. Fong. I think it might be helpful if Mr. Harden could 
provide some information on how FNS calculates its improper 
payment rate.
    The Chairman. That would be a good place to start.
    Ms. Fong. Yes.
    The Chairman. And again the number is generally about four 
percent, right, fallen from six percent to the point that we 
have made good progress here and that is important to point 
out. But still, the numbers are so large to get this down as 
close to zero as possible is obviously what we are all 
    Mr. Harden. I guess the place that I would start is the 
improper payment rate that is reported is a different number 
than what we are trying to look at in terms of fraud detection. 
And that process for the improper payments generally is that 
each state is required to do a sample of its recipients each 
year and find out if they are receiving the right amount of 
benefits. That can come with underpayments or overpayments. And 
that is a statistically selected review in the states as I 
understand it. The FNS then does an overlay sampling of those 
reviews to come up with a national improper payment rate.
    Your question about the collective impact of----
    The Chairman. Okay. So we are actually mixing terminology. 
Is that what you are trying to do is try to separate----
    Mr. Harden. Yes.
    The Chairman.--improper payments from fraud.
    Mr. Harden. Fraud. That four percent number doesn't 
encapsulate all of the above.
    The Chairman. Right. Okay. And what does it capture?
    Mr. Harden. That captures how well the states determine the 
amount that individuals were eligible to receive. So that 
includes improper payments and potential underpayment in that 
four percent.
    The Chairman. All right. Okay.
    Mr. Harden. Now, on the fraud detection side, I think a way 
to come up with a menu to try and come to a collective impact--
if I can go back and work on this--the test that we are doing 
in the states that are identifying deceased individuals or 
potentially deceased individuals, that list, there are also 
tools that states use with their processors of the transactions 
that should give them indications of potential fraudulent 
payments. That is where I was talking about having an out-of-
state usage report when people are using benefits in a 
different state, that identifies a number of people and an 
amount of money each month that is potentially being misspent. 
And that is where we have seen weaknesses in the past with 
different states we have looked at as to how well they are 
overseeing that part of the process. But that will also give 
you an indication of how much fraud there might be. But that is 
not a number that I have put together. I think I have a way of 
coming up with something that can provide you some information.
    The Chairman. So we do not have a general number that 
indicates the amount of fraud in the system?
    Mr. Harden. We do not.
    The Chairman. So the four percent number that we always 
talk about is not including fraud?
    Mr. Harden. Well, I guess it could in part if a person, 
when they are getting an improper payment, shouldn't have ever 
gotten it and there was a fraudulent part to that, but the real 
purpose of what FNS is doing there is not fraud-related. It is 
just to see are the people getting the right amount of 
    The Chairman. Yes. Well, then let us move to fraud 
detection in a more aggressive manner and talk about one of the 
other areas that we intended to discuss today regarding this 
SNAP trafficking issue. You alluded earlier that this is 
involving criminal investigations as well, but I think it would 
be helpful there to understand the magnitude of the problem and 
again to try to get some sense of the collective impact of cost 
on our system. That is ultimately what I am driving for.
    We are going to keep talking about this through next year 
and next--that is ultimately what I am driving for just so you 
have an understanding of where we are trying to get with all of 
these various components.
    So with that, let me stop and recognize my colleague, Mr. 
Baca, for any questions.
    Mr. Baca. Thank you very much, Mr. Chairman, and I thank 
the witness for being here. My question is for Ms. Fong. In 
your opinion, what are the most critical areas where FNS must 
improve to ensure the SNAP program is the best steward of the 
taxpayers' dollars that it can possibly be?
    Ms. Fong. Well, thank you for your question. I think I 
would like to say at the outset that FNS has a tremendous 
challenge in terms of delivering a program that has grown so 
substantially in the last few years. And at the state level, as 
has been remarked upon, the resources that are flowing to the 
states are tremendous and the state resources available to 
deliver the programs are shrinking as we hear when we travel 
around. Managing the program is a tremendous challenge and I 
would like to say that FNS has been very responsive whenever we 
identify areas where we think improvements could be made in 
terms of identifying eligibility issues up front, improving 
their data systems, dealing with trafficking situations, and 
working with us on those kinds of investigations. We have 
experienced a very professional level of cooperation with FNS.
    And so what I would say is that as we continue to identify 
areas in our work and bring them to FNS's attention, we 
appreciate the cooperation and attention that they give to 
those recommendations.
    Mr. Baca. Yes. We are seeing a higher volume of people 
applying for the SNAP program due to unemployment and also 
because the Bush tax initiative has not created any jobs. We 
are finding, in California, there are a lot of people who are 
unemployed because jobs have left the state and gone outside of 
the United States. We have an abundance of people on SNAP, and 
that is why I am curious to know what we should do about the 
state resources that are shrinking, because of the higher 
number of unemployed bodies that are out there right now, and 
more individuals that are applying for SNAP. And we just want 
to make sure that we are doing the right thing, there isn't any 
fraud, and that people that really deserve it get the kind of 
assistance they need.
    And that is why in my home State of California, we continue 
to suffer from one of the lowest SNAP participation rates in 
the nation. For whatever reason, people are not applying. The 
recent passage of legislation that ended the states' misguided 
fingerprinting imaging policy is a step in the right direction, 
but I still believe more must be done to raise awareness and 
accessibility to the SNAP program.
    In your opinion, how can this goal be best achieved? 
    Mr. Harden. From my understanding, we have continued 
discussions with FNS, but they have a very active policy in 
trying to get the outreach out there for the people that need 
it. We haven't done any specific work recently to give you 
specific suggestions.
    Mr. Baca. But could you? Because I think that becomes very 
important as we look at the tremendous need and the growth in 
the area. How do we do that kind of outreach? What needs to be 
done? What are the necessary changes? We have safeguards that 
are already there that protect against fraud indicated by the 
low rate of fraud in the SNAP program. In fact, SNAP fraud is 
less than that of defense contractors. Everybody wants to 
continue to make sure that we have the budget there for defense 
contracting, and that is where the biggest fraud exists versus 
in SNAP, where fraud is very little, and yet that is where the 
greatest need is.
    No offense, Mr. Chairman, but, that is where we seem to be 
pushing in that direction. And yet here is a program where 
there is a large need. You and I have been in Omaha, Nebraska 
and that area is dealing with some of these problems. I am very 
much concerned because sometimes there is a misconception that 
there is a lot of fraud in the SNAP program when in fact it is 
a lower percentage than in other areas we should really be 
    Let me ask a question pertaining to civil rights. As you 
know, the 2008 Farm Bill established the Office of Advocacy and 
Outreach to expand the participation of socially disadvantaged 
and beginning farmers and ranchers and other under-served 
constituents at USDA. Has OIG reviewed the efforts that have 
been made to bring the Office of Advocacy and Outreach to an 
operational level?
    Ms. Fong. We are aware that that office was recently 
established. It has not risen to our radar screen in terms of 
evaluating how effectively it is operating. As we do our 
planning every year, we look at risk and since everyone's 
resources are limited these days, we try to address areas of 
the most significant and highest risk. And so far we have not 
yet done work in this area.
    Mr. Baca. Well, hopefully you can get back to us and let us 
know what needs to be done, because we have looked at this new 
office that has been established to be simpler and more 
efficient. We changed it in the 2008 Farm Bill and so we want 
to make sure that it is cost-effective, yet at the same time 
providing the services to meet the need of the underserved. We 
are still trying to deal with Hispanic farmers that have been 
discriminated against and we haven't quite taken care of that. 
We have taken care of the Pigford decision and the Native 
Americans but we haven't taken care of the women and Hispanic 
farmers, that still needs to be addressed.
    I know that OIG's audit staff is presently looking at the 
operations of the Assistant Secretary for Civil Rights Office 
within the Department. Does this audit include the impact of 
the recent placement of the Office of Civil Rights under the 
direction of Assistant Secretary for Administration? If so, 
how, and has the bureaucracy changed and affected the Civil 
Rights Office?
    I know my time has expired, Mr. Chairman. I stopped looking 
at the light because I thought it was green and I am used to 
seeing red all the time.
    The Chairman. We are all violating my rules today but that 
is fine. You are fine.
    Mr. Harden. That was not part of our original objective in 
terms of the movement of the office whenever we started that 
audit, and it has not risen up as an issue in terms of how we 
are getting the audit process through. But I will ask if there 
have been any issues that they have seen related to that as we 
conclude that work.
    Mr. Baca. Thank you very much. I yield back whatever time I 
didn't have.
    The Chairman. Minus 2 minutes. We will put that on the 
    Well, thank you, Mr. Baca. I do have to respond to one 
thing you said. I only have oversight capability of USDA. I 
don't have it on defense. I would like to think I would be 
equally as hard over there if that were the case, but this is 
what is before us at the moment.
    By the way, we do have the eligibility criteria categorized 
by state. Our staff here gave us that so I will take a little 
work off your plate. And most states do not have a limit on 
assets by the way, which is interesting to see. Some do but 
most do not. And then there is gross income, wide variation on 
gross income requirements.
    But let us go back to a couple of points. One is making 
sure that we are all using the same terminology. The four 
percent error rate is improper payments, both overpayment, 
underpayment, the overpayments due to a variety of causes some 
of which are fraud-related. And there is a second issue of 
fraud and its total impact on the system, which you are 
suggesting we do not have a handle on. Individual fraud is 
generally handled by the states, retailer fraud generally 
handled at the Federal level. Is that a fair characterization 
of the way in which this system's enforcement mechanism works?
    Ms. Ellis. Yes.
    The Chairman. Okay. All right. I think it would be helpful, 
though, in your work to try--as much difficulty as you are 
having with certain collection of state data--to make certain 
recommendations not only how they prevent the fraud in the 
improper payments issue with people using it across state lines 
and the other problems with eligibility and Social Security 
Number and deceased persons, but to combine those two numbers 
with what has been the Federal emphasis on the retail fraud 
problems so that we get a better snapshot of just what that 
number is.
    Let me go back: the issue of a four percent overpayment has 
generally been considered the problem in the system. It has 
fallen from six to four percent; progress has been made. But it 
is not exactly the problem because it doesn't include the 
underpayment as well as overpayment. So to separate terminology 
and let us start to talk about the real either criminal 
activity or programmatic abuse that is out there and the lack 
of state enforcement and Federal coordination of those 
enforcements both on the individual as well as the retailer 
would get us to that collective number of fraud in the system, 
and give us some idea of the impact here and make sure this 
program is run with the highest level of integrity as possible.
    Is that a fair characterization of some of the language 
dilemmas we have had today, some of the crossover 
conversations? Is that a fair way to characterize the basic two 
sets of issues before us?
    Mr. Harden. I think so.
    Ms. Fong. I think you raise some very good points and you 
have summarized very well the kinds of issues that we are 
struggling with. And I will say personally that I would like to 
have a better grasp of these numbers and these issues. What we 
will do, our staff will reach out to FNS and see if we can get 
a better understanding of how these concepts work together. And 
we would be very happy to chat with your staff and you----
    The Chairman. Well, let us do that, and I think we will all 
be better prepared for the ultimate objective. What we are 
looking for here is again to how to reduce any waste or fraud 
that is in the system and make policy recommendations to ensure 
that there is no overpayments due to simply administrative, 
bureaucratic, or uninformed individuals, problems, or any 
burgeoning criminal activity and the appropriate policy 
recommendations to stop that. Again, we do not have the option 
of allowing for any slippage given the tight budgetary times 
and sometimes tight budgets actually force us to be more 
creative than we used to be. So we need to examine these in 
great detail. And it would be helpful to us once you unpack 
these complicated sets of issues, come back with policy 
recommendations that would look at again how states could 
better coordinate efforts, whether it is a shared database or 
the individual state could do a better job of looking at 
particular categories where we see some spikes in the problem 
of either eligibility underpayment, as well as fraud.
    So let us go quickly though to the issue of trafficking, 
SNAP trafficking, because I think this particularly strikes me 
as particularly outrageous. Again, moving to the electronic 
benefit card was supposed to eliminate a lot of this problem 
where we before had seen sometimes the stamps being used as an 
underground currency. So let us talk about how the abuse now 
occurs in the system, the size and magnitude of it, and how we 
prevent it.
    Ms. Ellis. The comments you made about the EBT supposed to 
be eliminating fraud, what we have found in our criminal 
investigations is that it has actually helped us as criminal 
investigators to detect the fraud and to actually make our 
cases as opposed to the coupons. And that is because everything 
is electronic and we do work with FNS who has the system known 
as ALERT, which helps them to find what the different patterns 
are. They have different ways of determining whether or not a 
retailer is involved in trafficking say, for instance, somebody 
is swiping--meaning the retailer--is swiping an EBT card every 
2 seconds when you know it should take longer than that to do a 
transaction. And so that has been a very good tool for us is 
going to the EBT system----
    The Chairman. First of all, explain that though. Okay, why 
    Ms. Ellis. Yes.
    The Chairman. How do you defraud the system by swiping it 
every few seconds? I am sorry. I just don't have a criminal 
mind like this. Would you help me understand?
    Ms. Ellis. Sure. Absolutely. What happens in trafficking is 
what you generally have is recipients who sell their EBT 
benefits. And what they do is they go into a retailer who is 
willing to take the recipient's benefits. Say, for instance, 
they have on their card $100 worth of benefits. The retailer 
will offer the recipient half of that amount. They will offer 
them $50 in cash, and so what happens is the recipient sells 
their card or hands over their card, gets $50 in cash from the 
retailer. Then the retailer swipes that EBT card through the 
system and therefore they make a $50 profit.
    The Chairman. But that is going to show up in the 
accounting on lack of goods purchased----
    Ms. Ellis. Exactly.
    The Chairman.--so that is why this was designed that way to 
prevent this, right?
    Ms. Ellis. And we find that unfortunately they look for 
ways to scam the system. And they are----
    The Chairman. So does the person that schemed, connived at 
this go and actually take the goods off the shelf?
    Ms. Ellis. And that is the problem. They don't. They walk 
into the store. And that is one of the indicators that I had 
mentioned that they can tell that this store is trafficking 
because FNS watched through their ALERT data, which shows the 
scans from the particular retailer. It will show that there are 
transactions happening every few seconds, which means that this 
card is being swiped for one recipient cash handed over, they 
leave, and here comes the next person, same thing, swiping.
    If you go to the grocery store, you know it takes longer 
than that to run all the groceries through and then to swipe 
the card. And that would be a legal transaction. It should take 
like 5, 10 minutes to actually do a good transaction. That is 
one of the anomalies that we look for----
    The Chairman. So this has to be insider work, the 
proprietor, owner, management of the particular outlet, or else 
they wouldn't be able to move the commodities out of the store. 
That is effectively their payment.
    Ms. Ellis. Right.
    The Chairman. Right?
    Ms. Ellis. And one of the things that I will let you know, 
too, is that a lot of these of course are the mom-and-pop 
    The Chairman. Right, so----
    Ms. Ellis. They are not----
    The Chairman.--how big is this? Again, give us the estimate 
on how widespread this is. I assume it is fairly small.
    Ms. Ellis. I can't tell that information. I can only tell 
you that our work in SNAP is increasing and for instance in 
2009 we were spending about 27 percent of our time conducting 
these cases, but it has grown so that as of Fiscal Year 2011--
    The Chairman. Okay----
    Ms. Ellis.--we were doing 48 percent. I don't know a dollar 
    The Chairman. It comes back to that question again. We have 
to have some better information to be able to use the cases 
that we have to create some statistically valid model that 
would actually give us an indication of how impactful this is 
in terms of cost. That also helps us determine future policies 
as well to address the issue.
    Ms. Ellis. I will add that I know FNS and the Department 
has utilized a one percent rate for trafficking. I do not known 
how they derived at that, and that is something that we can 
certainly--probably Mr. Harden would be visiting with them on. 
But that is the number that they have utilized.
    The Chairman. Okay. Well, I think again we are pretty clear 
on what we are driving to here to get a better handle on the 
definitions of what we are talking about in terms of improper 
payments, fraud, and the collective impact of both, even as 
they crossover in the part of improper payments that is due to 
    The policy recommendations that come out of your work 
particularly regarding the eligibility problem for individuals 
or the abuse of Social Security Numbers of persons who are now 
deceased, as well as maybe strengthening enforcement efforts 
for this trafficking issue, which, as you are suggesting, might 
contribute to about one percent loss. I assume what you said 
one percent means a total loss to our system, which again on a 
$70 billion program, that is a lot of money. So if enforcement 
efforts need to be intensified or if policy changes that would 
be helpful in terms of criminal investigations or enforcement 
actions could be forthcoming, I think that should be helpful to 
you but it would be helpful to us as well.
    So I turn to the Ranking Member now for any final 
statements or questions.
    Ms. Fudge. I have a couple of questions. He is really 
enjoying this questioning of you guys. Thank you, Mr. Chairman.
    Just two quick things actually because I do have to go to a 
markup. Obviously, we all want to be good stewards of the 
public dollar, that is what this whole thing is about. So our 
job in a lot of ways is the same as yours. Certainly, we do 
know that there is some fraud but the need is greater than the 
amount of fraud. So I just want to say that we want you to do 
everything you possibly can to try to weed out some of the 
issues that we have discussed today, and certainly if we can 
help you in some way to do that, then please let us know.
    I do want to ask a question shifting to a whole other 
subject and going back to what my colleague, Mr. Baca, was 
talking about. And that is civil rights. When you were here in 
June, we had a really good exchange about the status of USDA's 
Office of the Assistant Secretary for Civil Rights. And at that 
time you mentioned you were beginning a new audit to address 
civil rights complaints. Could you just give me an update on 
where you are right now with that?
    Mr. Harden. We were in the process of looking at--and what 
we are looking at there is the settlement agreements, I think 
is the right word to use, in terms of the payouts that they are 
making. Are they supported? Are they accurate? And how are they 
supported? We had started that work earlier. We are still in 
the process of pulling that together and I expect to have that 
report soon. But the reason we did not get that one done by 
this time, which we also talked about in June, is we found some 
other issues that we have had to work with, our counsel's 
office as well as the Office of General Counsel to make sure we 
properly understand the issues and if there is something to 
report and recommend.
    Ms. Fudge. When you say soon, you told me soon in June. 
Tell me what ``soon'' means.
    Mr. Harden. Can I get back to you with a more specific 
date? I would like to talk to the team so I can----
    Ms. Fudge. And you would get back to me when?
    Mr. Harden. This week.
    Ms. Fudge. Thank you so much.
    Just as a follow-up, I certainly do understand the 
restraints and constraints on your time and your resources. I 
do. But I really am very frustrated about this because since 
May of 2009 the semiannual reports from your office have listed 
a material weakness in civil rights. And that is your 
terminology, ``material weakness,'' as a persistent problem 
within the Office of the Assistant Secretary for Civil Rights, 
and yet we are still waiting for some tangible result. So just 
understand my frustration on that. And I want to impress upon 
you the importance of this work. So I will be looking to hear 
from your office.
    And last, I would like to briefly address USDA's IT system. 
In your testimony, you mention that OIG has made 43 
recommendations to remedy USDA's long-standing deficiencies in 
its IT security. However, USDA has only closed six of the 43 
recommendations. What gives, guys?
    Mr. Harden. As we have pointed out in this year's 
Information Security Report as well as last year, the 
Department struggles with what we have recommended is they 
prioritize those things so that they can close and make some 
progress. We have talked to them in terms of the number of 
projects that they try to complete and we are still in dialogue 
with them. They feel that they are able to complete the number 
of projects there are, but our work continues to show that they 
don't seem to be able to get them finished. So we continue to 
work with them to tell them how to prioritize their work to get 
things completed so that they will be able to close the 
recommendations. But the recommendations in those reports a lot 
of times are driven by the requirements that the National 
Institute of Standards and Technology makes, and sometimes 
those are changing which just creates more recommendations.
    Ms. Fudge. And I am going to go back to the question I 
asked in my first line of questioning. Who is responsible for 
making it happen?
    Mr. Harden. In that particular case?
    Ms. Fudge. Yes.
    Mr. Harden. If we are making recommendations to the Chief--
    Ms. Fudge. Yes.
    Mr. Harden.--Information Officer, the Chief Information 
Officer is responsible for getting those things made.
    Ms. Fudge. And who oversees that process to say you didn't 
do it? And what is the penalty for not doing it?
    Mr. Harden. The penalty for not doing it I will walk 
through quickly what I said before. We reach agreement on the 
recommendations. Then it transfers for oversight to the Chief 
Financial Officer's Office for monitoring until they actually 
complete the action. I guess the bad thing that happens is that 
if they do not meet the time frame of implementing it when they 
are supposed to or when they agreed to, it gets listed in the 
Department's Performance Accountability Report each year that 
it has not been done.
    Ms. Fudge. So there really is no penalty? So you tell on 
    Mr. Harden. That is the Department's statement for itself.
    Ms. Fudge. So, it is nothing more than an audit where you 
get an unqualified audit or something and you say, ``Look, you 
didn't do this.'' So if nobody enforces it, that could be in 
the audit for the next 20 years?
    Thank you very much.
    The Chairman. Okay. I thank the Ranking Member.
    Mr. McGovern, did you have----
    Mr. McGovern. Thank you very much.
    You know, I want to associate myself with my colleague, 
Congressman Fudge. We are all obviously committed to doing 
everything we can to eliminate fraud, waste, and abuse to the 
system. I want to make sure that every dollar that is paid out 
goes to somebody who actually needs it and doesn't go to fraud 
or doesn't go to somebody who doesn't need it, and so we are 
all very much committed to that.
    You know, the issue of categorical eligibility was raised 
here and the states have different requirements, but my 
understanding of categorical eligibility, it is really a 
process the states have embraced to kind of simplify the 
process of helping people get the benefits they need. And while 
you may be eligible under a state's Cat-El rules, while you may 
be eligible for SNAP benefits, that doesn't mean you get a cash 
benefit. I mean it just means you get considered. Am I correct? 
I mean the Federal standards don't get tossed away because of 
states categorical eligibility rules, am I right on that?
    Mr. Harden. As I understand it, yes.
    Mr. McGovern. All right, because again I want to take on 
this myth that somehow that Donald Trump is getting SNAP 
benefits or that because of categorical eligibility somehow he 
would be able to get SNAP benefits. I mean the way I look at 
it, that is not the problem with regard to some of the 
inefficiencies that currently exist in SNAP. Would you agree 
with that or----
    Ms. Fong. Well, I think that you are right, that that is 
not the policy of the program. The whole purpose behind 
categorical eligibility was to simplify the administration of 
the program.
    Mr. McGovern. But from what you are finding is the 
overpayments, it is not due to categorical eligibility.
    Ms. Fong. I don't think we have done enough work to be able 
to answer that question.
    Mr. McGovern. Okay. What would be helpful to me, as 
somebody who is a strong supporter of the program, as you 
develop your conclusions is to kind of give us some very 
specific assignments as to what we can do to make things 
better. I think in your testimony you talk about additional 
resources for IT, and we need to obviously upgrade our 
technology at the state and at the Federal level, but those 
kinds of things, to make the program run as efficiently as 
possible obviously are very, very helpful.
    And let me just conclude, why we are having this discussion 
here today and the real challenge here is that we have a 
problem in this country where people don't have enough to eat 
and we have a growing hunger problem. And one of the things I 
have urged the Administration to do which they haven't 
responded to me yet on is that I really do think that we need a 
national policy to deal with the food insecurity and hunger in 
this country. The White House should do a White House 
Conference on food and nutrition because the challenge of 
dealing with the costs that are incorporated with SNAP just 
don't fall under FNS or USDA. It is multiple agencies that need 
to come together and figure out how we eliminate hunger in this 
    I want to get to the point where we are not here talking 
about what we are talking about here today because the need for 
this program becomes less and less and less. I would urge USDA 
and the Administration to help bring us together and figure out 
a holistic plan to be able to deal with the fact that in the 
United States of America there is not a single community that 
is hunger-free, and that is something we all should be ashamed 
    The people who get SNAP by and large are poor people and 
not just the unemployed but the working poor as well. The fact 
that more and more people are eligible for this program, is 
cause for concern for all of us up here. In addition to giving 
us the recommendations on how to make this program run better, 
I would urge you--and I know you don't run the program--but we 
need a more holistic approach to the issues of food insecurity 
and hunger in this country.
    So I thank you for your work and look forward to continuing 
with this dialogue and getting your recommendations.
    The Chairman. I thank the gentleman.
    Just to conclude, I think we have some homework assignments 
here, and I would like to again get some clarification from you 
on how quickly we can finish your current work with the subset 
of states that you are looking at in terms of these eligibility 
and improper payment problems, those various categories that we 
talked about, how quickly will that be done.
    And then I think what would be helpful is moving away from 
some--let us say redefining some terminology here that helps us 
better understand the extent of fraud, the extent of actual 
criminal abuse in the system, the extent of improper payments 
so that the improper underpayments are one category of number, 
the improper overpayments are another category of number, and 
how those are coming about. Some of the criteria you listed 
today, that number then gets vetted with the fraud number and 
the primary focus of the Federal effort has been on this 
retailer fraud, which is also very important. But also to try 
to get some sense from the states as to how widespread the 
individual fraud problem is, which is not an aggressive focus 
of the Federal criminal investigations as I understand it.
    So then that gives us a better sense of the program's 
integrity, how well this is being run, what are the policy 
changes that could be made so that we are ensuring that we are 
meeting basic food safety needs in this country, which is the 
mission of this very important program, but using taxpayer 
monies in a most effective manner so that people who are 
eligible and need the help are receiving it properly, but those 
who are abusing the system are weeded out or even prosecuted. 
This is the purpose of trying to do this. I think the broader 
implications of food security are a little bit beyond the 
purview of this particular Committee but certainly a worthwhile 
discussion that we need to continue to have in the Agriculture 
Committee as a whole.
    My job is to try to get to some better data here so that we 
can get the potential policy recommendations that actually 
ensure the highest level of integrity possible in this program. 
I understand the other points being made about how this one is 
a natural target because there seems to be so many dramatic 
stories out there versus other programmatic areas in the 
government. But at the same time, because it is so large, it is 
necessary for us to do all we can to ensure that it is operated 
with great integrity.
    And so we are again depending upon you to do that. So have 
I made the task that I would like to see clear? Are you capable 
of completing that in a timely manner? Is that consistent with 
the resources and mission that you have what I have asked for?
    Mr. Harden. I believe we can, sir.
    The Chairman. Okay. Let us get a sense of the time and 
again let us don't get entangled in a significant delay here. 
If we see that coming, let us get preliminary data coming to us 
so that we all know what we are working toward. Can you give a 
sense of the time for what I have requested for the individual 
reports or the preliminary information that we have talked 
about today? Well, they are all related to the bigger question 
that I have driven to. They are all related to that so the 
finishing up of your sampling states is one question, and then 
the other implications of redefining some of the terminology so 
that we have some clearer understanding of the level of what we 
call improper payments due to underpayments, improper payments 
due to fraud and their various manifestations, improper 
payments due to criminal activity or abuse of the system due to 
criminal activity at the retailer level aggregated, that number 
as well so we can see the total impact on the system.
    Mr. Harden. The current timelines for the individual 
reports are, over the next couple months, with all of them done 
by the end of March. The rollup report that will pull that 
together and will tackle the question, with recommendations 
regarding how to get to the fraud number possibly, that will 
come after that. And before having this discussion today, I had 
a time frame for that in mind. I have a better understanding of 
what your question is and I need to go back and talk to the 
team in terms of what additional things we may need to do and 
what we can work with FNS to develop.
    The Chairman. Okay. Well, why don't you answer that 
question back to us in the near term----
    Mr. Harden. Okay.
    The Chairman.--next week or so.
    Mr. Harden. Okay.
    The Chairman. Would that be possible?
    Mr. Harden. I will try.
    The Chairman. Okay. And then we will have a better 
understanding of the timeline that is possible here. And if 
there is any slippage or delay, we need to understand why and 
then but still continue to get some preliminary snapshots of 
what looks like trends, okay?
    Mr. Harden. Okay.
    The Chairman. You have a lot of homework.
    Mr. Harden. Yes.
    The Chairman. Okay. Well, Ms. Fong, we are pretty clear now 
on what we need? Yes.
    Okay, well, again thank you all for your work. Thank you 
for coming today. And with that, we will conclude the hearing.
    [Whereupon, at 11:22 a.m., the Subcommittee was adjourned.]